It is popularly said that your income can be fixed, but your wealth needn’t. You need to make your money work for you and ensure that it grows, through smart investments.
One of the most popular ways to achieve this is by investing in the equity markets. Over the years, the equity markets have risen multi-fold and given impressive returns to investors.
The sooner you start investing in stocks and share market, the higher are the chances of compounding your wealth. This article will cover the key basics, at a beginner level, for stock market investing.
We will cover:
- What is stock and share market
- Details on key stock exchanges
- Benefits of investing in equities
- How to invest in stock markets in India
What is stock and share market?
An equity market or stock market is a place where people buy and sell shares of a listed company. The buying and selling occurs through the platform provided by the stock exchanges. In India, the National Stock Exchange and the BSE (formerly Bombay Stock Exchange) are among the biggest exchanges.
You can buy or sell the stocks listed on the exchange. The price at which you can buy / sell one share of the company is called as Share Price. This share price fluctuates based on its demand and supply. Factors such as the business fundamentals, financial health and other domestic and global factors can have an impact on the demand for a company’s stock.
When we multiply the Share Price with the Total Number of Publicly Traded Shares, we get the Market Cap. Based on its market cap, a company is classified as Large Cap (Market Cap of > 20,000 crore), Mid Cap (Market Cap between 5,000 – 20,000 crore) and Small Cap stock (Market Cap < 5,000 crore).
There are two types of stock market.
- Primary Market: This is where the companies make their debut in the market. Simply put, the Initial Public Offering (IPO) of a company happens in the primary market.
- Secondary Market: Once the IPO period is over, the company lists on the stock exchanges, and its shares are then traded in the secondary market.
To invest in both the Primary or the Secondary Markets, you need to have a Demat & Trading account. Click here to open a Demat account with PL within minutes.
Details on key stock exchanges
To invest in the stock markets, you need to know about the key exchanges. Here’s a quick glance at their details:
| NSE | BSE | |
| Benchmark Index | Nifty50 (Top 50 companies) | Sensex (Top 30 companies) |
| Started in | 1996 | 1986 |
| Number of companies listed | ~1600 | ~5200 |
When the prices of stocks in the benchmark indices fluctuate, they move up or down accordingly. When Nifty and Sensex move up, the market is said to be bullish, and when it moves down, it is called a bearish market.
These indices signify broad market sentiment, and are also used to gauge the performance of your other investments. For example: In one year, your mutual fund has given 5% returns, while Sensex has given 4% returns. This means, your scheme has outperformed the index.
Benefits of investing in equities
Here’s a quick look at the benefits of investing in the stock and share market:
Long-term returns: It is not about timing the market, but about time spent in the market! The longer you stay invested, the higher can be the potential returns. Equities tend to appreciate over the long-term and can generate significant returns.
Dividend income: As a shareholder, investors have a right over the profits earned by the company. The company may pay this in the form of dividends when its financial conditions permit it to do so. Investors also get voting rights on matters like election of board of directors and dividend payouts.
Diversification: Companies across sectors and market caps are listed on the exchanges. Stock market thus enables you to achieve diversification within your portfolio by investing in different sectors / market caps.
Balance risk: Through well-researched investments, you can balance risk and generate better returns over the long term to help you achieve your financial goals.
Liquidity: Investments made directly in the stock market can be redeemed by selling the shares as required, thus providing you with higher liquidity.
Hedge against inflation: Equities have the potential to generate inflation beating returns in the long-run.
How to invest in stock markets in India
You can invest in the stock and share market directly or through mutual funds, certain insurance schemes, PMS, etc.
Having a Demat & Trading account is a pre-requisite to investing in the stock market. PL is a SEBI-registered depository participant that provides demat & trading account services.
As a PL client, then you can invest not just in equity, but also derivatives, currency, commodity, mutual funds and insurance. Our comprehensive wealth bouquet ensures that you can address all your financial needs under one roof.
To open a Demat & Trading account with PL within minutes, visit our website or download our PL DigiTrade app. You can open a Demat account online within minutes by providing the below mentioned documents:
- Pan Card
- Identity Proof
- Residence Proof
- Bank Account Proof
- Proof of Income
- Photograph
For more details, click here
As a PL client, you get access to comprehensive details about stocks, sectors, and in-depth analysis with actionable insights on the PL DigiTrade app. The app also enables you to access PL’s award-winning research reports and calls, across fundamental, technical, derivatives, and currency and commodity. PL clients can also create their own Action Lists, for customised and real-time notifications. This enables you to make informed decisions about investing in the stock and share market.
You can also invest in stock markets through PL’s diverse basket of Mutual Fund offerings. A mutual fund is one of the easiest ways to get started on your wealth creation journey. It is essentially money pooled from various investors, which is then managed by a professional fund manager. The fund manager invests this money into stocks and/or other securities in order to generate returns for the investors.
Today, a variety of mutual funds are available in the market. Whether you are a conservative, moderate or aggressive investor – you can invest in mutual funds that suit your risk profile and investment objective. Mutual Funds also give you exposure to different asset classes, including equity, debt, hybrid, etc.
You can get access to a variety of mutual fund schemes and the right guidance from experienced professionals at Prabhudas Lilladher. To invest in mutual funds with PL, click here